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Data backup: Critical measures for advisors

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Financial advisors resist long, comprehensive lectures about backing up data, but compliance and security officers insist that those measures should rank as a priority and necessity.

Brent Everett, chief investment officer for Talis Advisory Services of Plano, Texas, stands out as the rare investment advisor with an educational background in computer science. That background means that he is keen on digging deep and discussing at length his firm’s data backup systems.

“We tend to think about these things more than the average advisory firm,” Everett says about Talis Advisory.
The firm uses redundant systems to back up its data.

Talis tapped an outside vendor for a cloud-based system. When choosing the vendor, Everett made sure that it offered regular and integrated reporting systems so he could verify that data on each individual computer in the office got backed up each day.

“I need to know at a glance,” he says, and he does that with emailed reports from the vendor.
The servers where the backup data land are located at two tornado- and earthquake-proof buildings on separate coasts, Everett says.


But that isn’t Everett’s only backup system. Each month he downloads the data from each computer onto a DVD and takes it to the firm’s safety deposit box at a bank, offsite.

“We may be engaged in overkill, but that’s better than the alternative,” Everett says.

Even if other advisory firms remain unwilling to follow Everett those extra nine yards, they must at a minimum verify that the backup system on which they rely actually keeps the data stored, says Michael Barba, managing director in the forensic technology services practice in New York at BDO Consulting, which has branches nationwide and helps advisor firms collect data for IT audits and other legal purposes.

He can tell fear-inducing stories about when BDO consultants have had advisors turn over their backup tapes and then discovered nothing remained on them because they had been stored in inadequate conditions, perhaps with too much heat or humidity.

“People don’t realize, they have to check their backups,” Barba says.


If they choose as an alternative, to keep their backup data on the cloud, as more advisors do more often these days, they still have verification tasks, he says.

Specifically, they need to verify that their provider offers them a service agreement that guarantees data storage at least two physical locations for the servers.

“They will pay more for that, but they need to,” Barba says.

With most of the larger providers of cloud-based backup systems, such as Amazon.com and Rackspace.com, advisors should easily extract those types of service agreements.

But that isn’t the case with some of the smaller providers of cloud-based backup systems, Barba says.
He recommends that advisors physically go and discover where those providers have servers located.

“You could be backing up into somebody’s garage, literally,” Barba says.

Miriam Rozen, a Financial Planning contributing writer, is a staff reporter at Texas Lawyer in Dallas.

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